SAN DIEGO–(BUSINESS WIRE)–Ligand Pharmaceuticals Incorporated (NASDAQ: LGND) today reported financial results for the first quarter with strong sales of Captisol to partners evaluating remdesivir in multiple clinical trials and scaling-up for potential treatment courses for COVID-19.
“Our first quarter financial results feature strong sales of Captisol to partners evaluating remdesivir in multiple clinical trials and scaling-up for potential treatment courses for COVID-19. We continue to meet Captisol requirements to support these trials as well as manufacturing scale-up, and are proud to play a role in developing potential treatments to address the pandemic both with Captisol and with various OmniAb® and Vernalis-derived product candidates,” said John Higgins, Chief Executive Officer of Ligand. “We recently closed a strategic acquisition, and throughout the first quarter we added a number of Shots on Goal with new agreements for various technologies, in particular our OmniAb platform. Overall, our business is performing very well, especially given the difficult business environment due to the pandemic. As such, we are pleased to be raising our 2020 financial guidance.”
COVID-19 Impact
As the COVID-19 pandemic continues to evolve, our primary concern remains the health and safety of our employees and partners globally, while we continue to take actions to help address the pandemic.
We are supporting our employees through a range of programs, have enabled working from home and staggered operations in our labs and other critical work spaces. Importantly, Ligand is committed that there will be no COVID-19 related layoffs. Our corporate structure is spread across five sites in the U.S. and England, which positions us well to operate effectively in the current remote working environment. The Ligand team is ready to support a return to full operations with appropriate social distancing measures in place, following the lifting of shelter-in-place restrictions.
We have a very strong balance sheet, and we anticipate no material operational impacts for the rest of the year due to COVID-19. During the first quarter, COVID-19 did not have a material negative impact on our underlying business, financial condition, cash collections or liquidity. During the first quarter we reduced our outstanding convertible debt by approximately one-third given the favorable pricing on the bonds and the lower interest rate environment.
Our partnership with Gilead Sciences for remdesivir resulted in an increase in sales of Captisol to supply the scale up and manufacturing of that medicine as the first new treatment for COVID-19 available under an Emergency Use Authorization. We do not anticipate supply chain disruption for Captisol production at this time given inventory levels, risk management measures and operations at multiple sites throughout the world. We believe we are well positioned to meet Captisol requirements and are planning to make further capital investments in plant and operational capacity.
We have a large portfolio of more than 200 programs fully funded by more than 125 different pharmaceutical and biotechnology companies. We recently surveyed all our partners and found that the majority of them are generally in a relatively strong capital and operating condition with limited expected long-term impact on our partnered programs. Looking ahead to the remainder of the year and after thoroughly analyzing our business, we anticipate royalty and contract revenue will be lower than originally forecasted. We believe that patient access to certain medicines around the world will be disrupted over several months, which may decrease revenue for products from which we earn royalties. In addition, we anticipate that some partners will delay trial initiations or experience a slowdown in patient enrollment. These delays and slowdowns will likely reduce milestone payments for contract revenue due to Ligand. In addition, some smaller partners may face cash constraints or difficulty raising new capital, which could impact their ability to make payments to Ligand. Nonetheless, as the economy begins to reopen we expect our partners will resume important clinical and regulatory work on a wide array of partnered programs. Additionally, to date the increase in sales of Captisol has more than offset our projected decline in royalty and contract revenues. While the mix of revenue will be different than our original outlook, we anticipate total revenue and earnings to be higher in 2020 compared to our previous guidance.
Ligand has multiple programs relating to potential treatments for COVID-19. One is with Gilead for remdesivir, a nucleotide analogue issued an Emergency Use Authorization by the U.S. Food and Drug Administration on May 1, 2020. We also have two OmniAb partners with antibody programs in discovery stage, and a heat shock protein program that was added to our R&D programs when we acquired Vernalis.
First Quarter 2020 Financial Results
Total revenues for the first quarter of 2020 were $33.2 million, compared with $43.5 million for the same period in 2019. Royalties for the first quarter of 2020 were $6.6 million and primarily consisted of royalties from Kyprolis® and EVOMELA®. Royalties for the first quarter of 2019 were $19.5 million and included $14.2 million in royalties from Promacta®; Ligand sold its Promacta license to Royalty Pharma as of March 6, 2019. Captisol sales were $21.1 million for the first quarter of 2020, compared with $9.0 million for the same period in 2019, primarily reflecting higher sales of Captisol for remdesivir. Effective this quarter, Ligand is presenting service revenue as a separate line item. Service revenue includes revenue generated from our Vernalis, Icagen and OmniChicken businesses as we collaborate with partners on early stage discovery and development work, and was $3.4 million for the first quarter of 2020, compared with $3.9 million for the same period in 2019. Contract revenue was $2.1 million for the first quarter of 2020, compared with $11.1 million for the same period in 2019, with the change driven by the timing of partner events.
Cost of Captisol was $4.7 million for the first quarter of 2020, compared with $3.9 million for the same period in 2019. Amortization of intangibles was $3.5 million for the first quarter of both 2020 and 2019. Research and development expense was $11.9 million for the first quarter of 2020, compared with $11.3 million for the same period of 2019. General and administrative expense was $9.3 million for the first quarter of 2020, compared with $11.1 million for the same period in 2019, with the decrease primarily attributable to lower legal expenses.
Net loss for the first quarter of 2020 was $(24.1) million, or $(1.46) per diluted share, compared with net income of $666.3 million, or $31.32 per diluted share, for the same period in 2019. The net loss for the first quarter of 2020 includes a non-cash change in the value of Ligand’s investments of $(25.5) million, while net income for the first quarter of 2019 includes a $17.3 million net non-cash gain from the value of Ligand’s investments as well as a $640.3 million gain, net of taxes, from the sale of the Promacta license. Adjusted net income for the first quarter of 2020 was $15.3 million, or $0.89 per diluted share, compared with $24.7 million, or $1.16 per diluted share, for the same period in 2019. Please see the table below for a reconciliation of net income/(loss) to adjusted net income.
As of March 31, 2020, Ligand had cash, cash equivalents and short-term investments of $738.8 million. During the first quarter of 2020, Ligand repurchased $234 million in principal amount of its convertibles notes at a price of $203 million, and repurchased 878,525 common shares for $73.3 million.
2020 Financial Guidance
Ligand is raising its 2020 financial guidance. Ligand now expects 2020 total revenues to be approximately $140 million and diluted EPS to be $3.65, up from previous guidance for total revenues of approximately $133 million and diluted EPS of $3.62. This increase reflects Ligand’s revised view on the business incorporating an estimated impact from COVID-19. The revised estimate of approximately $140 million in total revenues includes higher sales of Captisol, partially offset by reductions in royalties and contract revenue.